Gold and Silver Prices Rise on MCX as Crude Oil Slides and Dollar Weakens Ahead of US Inflation Data

Gold and silver prices moved higher on the Multi Commodity Exchange (MCX) in early trade on Wednesday, August 26, as a sharp fall in crude oil prices and weakness in the US dollar supported precious metals. Investors are also closely watching the release of the US Personal Consumption Expenditures (PCE) price index, a key inflation indicator for the Federal Reserve.

MCX gold futures for October delivery rose 0.16% to trade at ₹1,63,146 per 10 grams in early trade. MCX silver futures for September delivery gained 0.64%, trading around ₹2,45,700 per kg.

The rise came amid significant movements in global commodity and currency markets, with softer energy prices raising hopes of easing inflationary pressures.

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Crude Oil Falls Sharply, Supporting Bullion

International crude oil prices witnessed a sharp decline, with Brent crude futures falling around 3% and hovering near $86 per barrel.

The decline in oil prices came amid expectations of an easing of supply disruptions in the Middle East. Reports of renewed discussions involving Iran and Oman over the management of the strategically important Strait of Hormuz have raised hopes that maritime movement through the region could improve.

A reopening or easing of restrictions around the waterway could reduce concerns over disruption to global energy supplies, resulting in lower crude prices.

Since energy costs play a significant role in inflation expectations, softer crude prices have also strengthened expectations that inflationary pressures could moderate. This has provided support to gold and silver.

US Dollar Remains Below Key Level

The US dollar index remained below the 99 mark, further supporting bullion prices.

Gold and silver generally become more attractive to holders of other currencies when the dollar weakens. A softer dollar can therefore increase international demand for precious metals.

Lower US Treasury yields have also contributed to the positive sentiment surrounding bullion, as non-interest-bearing assets such as gold become relatively more attractive when bond yields decline.

Middle East Uncertainty Continues

Despite hopes of progress concerning the Strait of Hormuz, geopolitical uncertainty in the Middle East continues to remain a key factor supporting safe-haven demand for gold.

Iran has indicated that newly announced US sanctions will not contribute to peace in the region. At the same time, tensions between Washington and Beijing have added another layer of uncertainty to the global economic environment.

China has strongly defended its economic relationship with Iran following US action against several Chinese entities over alleged dealings connected with Tehran. Beijing has indicated that it will take measures to protect its interests and that its relationship with Iran should not be undermined.

The combination of geopolitical tensions, concerns over sanctions and uncertainty surrounding global trade continues to support gold’s role as a traditional safe-haven asset.

Markets Await Crucial US PCE Inflation Data

The immediate focus of global markets is now on the US Personal Consumption Expenditures price index for July.

The PCE index is closely monitored because it is the Federal Reserve’s preferred measure of inflation. The outcome could significantly influence expectations regarding future interest-rate decisions in the United States.

A softer-than-expected inflation reading could strengthen expectations of a more accommodative monetary policy environment, potentially benefiting gold and silver. On the other hand, stronger inflation data could revive concerns that interest rates may remain elevated for longer.

Investors are also awaiting further comments from the Federal Reserve at the Jackson Hole symposium later this week for additional clarity on the direction of US monetary policy.

Lower Energy Prices May Give Fed More Flexibility

The sharp decline in crude oil prices has raised expectations that lower energy costs could help reduce inflationary pressures in the coming months.

If inflation moderates, the Federal Reserve may have greater flexibility in determining the future path of interest rates. Expectations of lower interest rates generally support precious metals because they reduce the opportunity cost of holding assets that do not generate interest.

At the same time, continued demand for gold as a hedge against fiscal uncertainty, currency fluctuations and geopolitical risks is supporting the broader bullish outlook.

Gold Continues to Hold Bullish Structure

Technically, gold continues to display a positive trend, although the possibility of a short-term correction cannot be ruled out after the sharp rise in prices.

MCX gold is currently approaching important resistance zones. The ₹1,63,600 level is being closely watched as an immediate hurdle, while a move beyond this range could potentially open the way for higher levels.

On the downside, the ₹1,62,600 region is emerging as an important support zone. A sustained decline below key support levels could trigger profit-booking and a technical correction.

The broader trend, however, remains positive as gold continues to maintain a pattern of higher highs and higher lows and remains above important technical averages.

₹1.67 Lakh Level Emerges as Next Major Resistance

Market analysts are also watching the ₹1,67,000 per 10 grams region as an important higher resistance level for MCX gold.

The ₹1,60,000 level has emerged as a major support zone. As long as gold prices remain above this range, the broader buy-on-dips strategy may continue to find support from traders.

International gold prices also remain near elevated levels despite occasional profit-booking, indicating that the broader global trend in bullion continues to remain strong.

Key Support and Resistance Levels for Gold

For MCX gold, immediate support levels are being watched around:

₹1,62,200
₹1,61,000

Important resistance levels include:

₹1,63,650
₹1,64,400

A sustained move above the resistance range could strengthen the bullish momentum, while a fall below the support zones could lead to short-term correction.

Silver Remains Strong Amid Bullish Momentum

Silver also continued its upward movement, outperforming gold in percentage terms during early MCX trade.

MCX silver was trading close to ₹2.46 lakh per kg, supported by the broader strength in precious metals and improving expectations regarding inflation and interest rates.

Key support levels for MCX silver are placed around:

₹2,41,400
₹2,39,100

Major resistance levels are seen near:

₹2,47,000
₹2,50,000

Internationally, silver has important support near $67.70 and $66.60 per troy ounce, while resistance is being watched around $69.80 and $71 per troy ounce.

What Lies Ahead for Gold and Silver?

The outlook for gold and silver will largely depend on the upcoming US inflation data, the movement in the dollar and Treasury yields, developments in the Middle East and signals from the Federal Reserve.

For now, softer crude oil prices, a weaker US dollar and continuing geopolitical uncertainty are providing a favourable backdrop for precious metals.

However, volatility is likely to remain high as traders react to the US PCE inflation figures and upcoming monetary policy signals. While the broader trend remains bullish, market participants may also witness bouts of profit-booking and technical corrections at higher levels.

Disclaimer: Commodity prices are highly volatile. The views, trading levels and market expectations mentioned in this article are for informational purposes only and should not be construed as investment or trading advice.

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